Valley Perspective

While Cable Profits, the Viewers Suffer

Assembly measure seeks to use state law to enhance competition and protect consumers from abusive industry practices.

March 22, 1998|JACK SCOTT | Assemblyman Jack Scott, a Democrat, represents portions of the San Fernando and San Gabriel valleys

In 1996, the cable industry went before Congress and asked it to rewrite radio and television law for the first time in 62 years. Promising both increased competition and improved quality, the industry pushed for reforms that gave it more control to set prices.

Unfortunately, deregulation has failed to promote the competition that the cable industry promised. Cable still owns 87% of the subscription market in the United States. Moreover, the biggest cable providers, Tele-Communications Inc. (TCI), Time Warner, Continental and Comcast, continue to strengthen their grip on cable markets. Since enactment of the 1996 Telecommunications Act, these four providers have increased their market share from 55% to 61%.

Furthermore, this new era of deregulation has been a financial windfall for the cable giants. The share values for TCI, the country's largest cable television company, have more than doubled since the beginning of 1997, and Time Warner's have risen by 60% in the same period.

Industrywide, revenues for cable providers have increased from $4.7 billion in 1995 to a record high of $6.77 billion at the end of 1996, all at the expense of cable television consumers.

At the same time that cable companies have profited handsomely, cable television viewers have suffered. Consumers continue to face increasing costs just to maintain the same old cable service.

Cable rates shot up at more than four times the rate of inflation in California in the first six months after passage of the Telecommunications Act, according to the Federal Communications Commission (FCC). Even more troubling, rates for basic service subscribers rose by 14%, nearly seven times the rate of inflation during the first 12 months of deregulation. And there appears to be no end to the cable industries' insatiable appetite for ever-greater profits.

In January, FCC Chairman William E. Kennard warned that cable rates would continue to rise because the competition envisioned by Congress "is not here and its not imminent."

It is clear that despite the promise of the Telecommunications Act, the cable monopolies are solidifying their hold on consumers because of artificial impediments to competition secured by the powerful cable lobby. For instance, federal law prohibits competing satellite companies from carrying local television stations, placing them at a distinct disadvantage. Ironically, this prohibition has enabled the cable industry to portray satellite services as "inconvenient."

To date, Congress and the FCC have been reluctant to rein in the cable industry. While federal officials continue to sit on their hands, California's 6.5 million cable subscribers remain at the mercy of the cable industry.

Although the states are preempted by federal law in most areas of cable industry regulation, there are still avenues for state governments to break down some barriers to competition and protect consumers from abusive practices. To this end I have joined with many of California's leading consumer advocates and senior citizens organizations to introduce the Cable Television Consumer Protection Act of 1998. This comprehensive measure would enhance competition and protect consumers by:

* Opening up competition by limiting franchise agreements to no more than five years, requiring a more open bid process, including mandatory public hearings.

* Assisting local governments in negotiating with the cable industry by providing a checklist and potential guidelines.

* Opening up multi-residential dwellings, such as apartment complexes, to competition by clearly establishing that the property owner owned inside common wiring. This would enable the landlord and / or tenants to seek service from competing entities, such as Direct TV or satellite providers.

* Requiring truth in advertising by forcing cable companies to disclose to consumers their least expensive, or "basic," tier and by prohibiting cable providers from initiating any service without first obtaining written authorization from the consumer and fully disclosing the nature and price of service.

* Requiring that any charge outside FCC jurisdiction, such as universal coverage charges, be approved by the Public Utilities Commission before being assessed.

* Cap late charges at $2.30 for the first month a bill was delinquent.

Although this bill represents a modest step toward reforming the cable industry, it sends a loud message. And the message has been clearly heard. The day that AB 1893 was introduced, industry lobbyists descended on the state Capitol to make their opposition known.

Make no mistake, the California Cable Television Assn. is a powerful force in Sacramento. During the first six months of last year the industry spent more money lobbying in California than any other interest group, with the exception of oil.

The sad reality is that no one lawmaker is a threat to the well-heeled cable industry. Reform will only occur when public outrage reaches a high enough pitch to drown out the pressure from industry lobbyists and prompt other legislators join this crusade for fairer cable rates.